Week 2 | December 2025

On December 10, defense ministers from Australia, the UK, and the US met at the Pentagon and, for the first time, declared AUKUS Pillar 2 must focus on "near-term warfighting objectives."

For four years, Pillar 2 (the advanced capabilities arm of AUKUS covering undersea autonomy, AI, quantum, and electronic warfare) has been debated for its real-world impact. While submarines draw attention, Pillar 2 has often been criticized as lacking clear warfighting results, sparking questions about its tangible benefits compared to the headline submarine program.

But something shifted in the last quarter of 2025. And if you're tracking maritime autonomy procurement, or betting on which defense tech companies will win the Indo-Pacific build-out, you need to understand what changed and what it means.

In September, Australia awarded Anduril a $1.7 billion AUD contract to produce a fleet of Ghost Shark extra-large autonomous underwater vehicles for the Royal Australian Navy. Seven weeks later, Anduril opened a 7,400-square-metre manufacturing facility in Sydney. The first production vehicle is scheduled for delivery in January 2026.

The timeline here is worth sitting with. Anduril signed the initial co-development contract in May 2022. Three prototype XL-AUVs were delivered ahead of schedule and under budget by 2025. Now they're in low-rate initial production, with full production scheduled for 2026. That's concept-to-production in under four years for an Australian-manufactured autonomous undersea capability.

For comparison, the SSN-AUKUS submarine's preliminary design review won't take place until September 2026. The first Australian nuclear submarine won't enter service until the 2040s.

Ghost Shark represents the intended impact of Pillar 2: rapidly delivering capability, in contrast to the slow pace of traditional defence procurement. Through Pillar 2, Anduril took on significant development risk with its own capital before securing government funding. However, the co-development contract from Defence, enabled through Pillar 2, was material to bringing the prototypes to completion. The Australian government, consistent with Pillar 2's ambitions, responded with an accelerated procurement pathway that skipped the usual systems design and development phase.

As Minister for Defence Industry Pat Conroy put it at the factory opening: "The Ghost Shark is the most high-tech, long-range autonomous underwater capability that exists in the world today." Subject to export approvals, Anduril is positioning the Sydney facility to produce vehicles for allied nations, including the US Navy and other Indo-Pacific partners. The AUKUS template for maritime autonomy may be scaling beyond the trilateral partnership.

Ghost Shark is the exception that proves the rule about Pillar 2's broader dysfunction.

In June, Peter Dean and Alice Nason at the US Studies Centre published a detailed assessment titled "AUKUS Pillar II Is Failing in Its Mission." Their diagnosis was blunt: Pillar 2 has been "a solution in search of a problem," led by technology ambitions rather than defined operational needs. Importantly, their critique focused on structure and governance rather than a blanket dismissal of all Pillar 2 projects. That distinction matters for understanding why maritime autonomy has progressed while other technology areas have stalled.

The structural problems they identified remain largely unresolved:

·    No clearly identifiable, ring-fenced funding. There is no single AUKUS Pillar 2 appropriations line in any of the three national budgets. Most activity is nested within existing programs of record and agency innovation lines such as ASCA, DIU, and DASA. It took three years to even reach consensus on that approach.

·    Scope creep. The original four priority areas (cyber, AI/autonomy, quantum, undersea capabilities) expanded to eight in 2022. Too many fronts, insufficient resources on any of them.

·    Organizational weakness. Where Pillar 1 prompted Australia to create a 550-person Australian Submarine Agency, Pillar 2 has no equivalent institutional heft. In the UK, the Ministry of Defence's Pillar 2 team has been entirely restaffed, losing institutional knowledge each time.

·    ITAR friction persists. The AUKUS ITAR exemption went into effect in September 2024, but early industry feedback from 2024-25 UK Parliament hearings suggests the reforms haven't yet translated into practical change on the ground. As one witness put it: "There may be an approved list, but we still cannot really do anything." The implementing regulations and internal processes are still bedding in, and it remains to be seen whether the exemption delivers its promised benefits.

Each of these problems lands hardest on maritime autonomy, where cross-domain integration, shared standards, and rapid iteration are prerequisites rather than nice-to-haves. The irony is that Pillar 2 technologies could deliver operational impact this decade, while Pillar 1 submarines won't arrive until the 2040s. But without focus, funding, and organizational weight, the near-term advantage has been squandered.

The Ghost Shark contract isn't an isolated data point. Several other developments suggest Pillar 2 is gaining traction:

The Maritime Innovation Challenge 2025 launched in March with around US$8-9 million in funding across the three nations, expected to support 3-10 proposals. Unlike previous vague "advanced capabilities" language, this challenge has a specific focus: undersea communications and control of autonomous systems. The solicitation explicitly seeks solutions for real-time communication between UUVs and command nodes, optimal asset allocation in dynamic environments, and navigation in contested underwater conditions. Stage 1 submissions closed in April; Stage 2 contracting is underway.

Adelaide-based QuantX Labs and the University of Adelaide completed six weeks of quantum clock trials in Washington, DC, in November. These Australian-developed devices, funded by $2.7 million AUD in government contracts, were tested under various environmental conditions for defence applications, including GPS-denied navigation. The results will be shared across AUKUS partners. Quantum timing is one of those unsexy foundational technologies that enables everything else, and Australia is demonstrably ahead.

Saildrone and Thales Australia demonstrated the integration of Thales's BlueSentry towed-array sonar with Saildrone's Surveyor USV during ONR-funded trials off the coast of California. The system operated for 26 days with 96% uptime, autonomously detecting and classifying underwater threats. Both companies framed the capability as aligned with AUKUS Pillar 2 undersea warfare requirements. Wind-powered ASW with persistent towed array coverage at a fraction of traditional platform costs: this is the kind of asymmetric capability the partnership was designed to produce.

HII and Babcock signed an MOU in September to integrate HII's REMUS UUVs with Babcock's weapon handling and launch systems. In October, the US Navy demonstrated launch and recovery of a REMUS 620 from a Virginia-class submarine. The Royal Navy expects similar trials in 2026. This is the "force multiplier" vision for SSN-AUKUS: nuclear submarines deploying swarms of autonomous vehicles for ISR, strike, and mine countermeasures.

Pillar 2 is at an inflection point. The structural problems haven't disappeared. There's still no dedicated funding line, focus remains scattered, and export control friction persists. But real capability is being delivered, and the December ministerial language about "near-term warfighting objectives" suggests political attention is finally concentrating.

For maritime autonomy specifically, the procurement signals are increasingly clear:

·    XL-AUVs are a program of record. Ghost Shark's $1.7 billion contract isn't a demonstration or a prototype phase. It's production. Other navies are watching. Anduril is building export-ready capacity.

·    Interoperability is the design constraint. The emphasis on STANAG 4817, shared launch/recovery systems, and trilateral UUV standards means AUKUS partners are building toward a common autonomous undersea architecture rather than three parallel programs.

·    Commercial-off-the-shelf matters. The Maritime Innovation Challenge, the Saildrone/Thales integration, and Anduril's commercial baseline all point toward leveraging commercial autonomy rather than building from scratch. Speed comes from adapting existing technology, not reinventing it.

Taken together, these recent milestones confirm that within maritime autonomy, Pillar 2's impact is shifting from experimental to actively delivering operational capabilities. This contrasts with other Pillar 2 technology areas, which have yet to reach operational maturity. The critique of Pillar 2's diffuse focus remains valid overall, but in maritime autonomy, operational impact is now tangible.

According to ASPI's Critical Tech Tracker, China leads in 57 of 64 technology priority areas. The Indo-Pacific window for conventional deterrence is narrowing. Pillar 2's promise was always that it could deliver capability faster than Pillar 1 submarines. After four years of potential, we're finally seeing that promise materialize in procurement dollars and on factory floors.

If you're tracking the industry implications, the emerging Pillar 2 model favors a specific profile: firms with export-oriented, COTS-first, interoperable undersea offerings. Anduril, Saildrone, HII's REMUS line, and Thales Australia all fit this mold. They're building products designed for allied procurement from the start, not adapting legacy platforms after the fact.

By contrast, "science project" vendors in quantum, EW, or AI without clear concepts of operations remain at risk. Pillar 2's dysfunction has been precisely about funding research without a pathway to fielded capability. The maritime autonomy lane is showing what happens when that pathway exists. Companies that can demonstrate the same progression in other technology areas will be well-positioned. Those still pitching R&D without production roadmaps will continue to struggle for Pillar 2 dollars.

We shift to the regenerative materials side of Ocean Tech with an overview of the kelp economy: the companies, the science, and the market opportunity in marine biomaterials. If you're tracking the intersection of defense procurement and sustainability investment, you won't want to miss it.

Since you have been, thanks for reading.

Cheers,

Mick